Gen Z Drives 19.6% Surge in Card Installments Shift

The financial landscape is witnessing a fascinating recalibration, particularly within the burgeoning "pay later" economy. Contrary to popular belief, the dominant narrative isn't solely defined by the meteoric rise of dedicated Buy Now, Pay Later (BNPL) services. A more subtle, yet equally impactful, transformation is unfolding: the significant surge in installment plans directly tied to traditional credit cards, encompassing both private-label and general-purpose offerings. This fundamental shift signals a potential paradigm change in how millions of consumers across the United States manage their everyday borrowing and expenditure.

The Evolving Landscape of Consumer Credit and Pay Later Options

Recent comprehensive analysis reveals a dynamic evolution within the payment ecosystem. The PYMNTS Intelligence report, titled “Split Shift: How Card Installments Are Reshaping the Pay Later Landscape,” illuminates that installment options provided by both private-label and general-purpose credit cards are experiencing robust growth. This phenomenon is particularly pronounced among middle-income shoppers and spans across various age demographics, from younger Generation Z individuals to older consumers, suggesting a broad-based appeal.

The study, meticulously compiled from surveys of 8,250 U.S. adults conducted between late March and late May, provides crucial insights. While dedicated BNPL providers certainly continue their expansion, the data unequivocally demonstrates that card-based installments are not only expanding into a wider array of spending categories but are also attracting a more diverse consumer base. This paints a picture of a sophisticated "pay later" ecosystem where shoppers frequently combine traditional credit mechanisms, store-specific cards, and BNPL solutions. This integrated approach is often driven by a desire for enhanced predictability and greater control over their personal finances.

Private-Label Cards Lead the Installment Revolution

A significant finding from the report highlights the impressive trajectory of private-label card installment usage. The number of adults utilizing these options increased from 27.9 million in 2023 to 30.3 million by May of the current year. This represents a compound annual growth rate (CAGR) of 4.8%, a figure predominantly bolstered by the engagement of middle-income shoppers and, notably, Generation Z. In a striking testament to their influence, Gen Z recorded a staggering 19.6% growth rate in their adoption of private-label card installments, making them the fastest-growing demographic across all generations surveyed. This indicates a strong preference among younger consumers for structured payment plans, often facilitated by retailers they frequent.

General-Purpose Cards: A Foundation of Installment Payments

Installment usage on general-purpose credit cards, while growing at a comparatively slower pace, still represents a massive and stable user base. The number of users increased from 47.2 million in 2023 to 47.8 million in May, an annual growth rate of 0.8%. Despite the modest percentage increase, this signifies a vast segment of the population that integrates installment options into their financial habits. The report further emphasizes that approximately one in seven Gen Z and millennial consumers actively utilized card installments during the three-month period concluding in May, underscoring the widespread adoption among younger, financially active cohorts.

The Rise of a Blended Payment Strategy

An intriguing aspect of the current market dynamics is the growing propensity for consumers to employ a hybrid payment strategy. Nearly 22 million consumers reported using both a private-label card and a general-purpose card to make installment payments in May. This trend signifies a 5.3% growth rate since 2023, clearly indicating a movement towards a more diversified and flexible approach to payment tools. Consumers are no longer bound to a single method but are strategically combining options to suit specific purchases and financial goals, often seeking the most advantageous terms available across different platforms.

Underlying Dynamics Shaping the Pay Later Market

Beyond these primary statistical findings, the report delves into deeper currents that are fundamentally reshaping the broader "pay later" market, influencing consumer behavior and provider strategies alike.

The Allure of Predictable Payment Schedules

One significant factor driving the adoption of installment plans is the inherent appeal of predictable payment schedules. Irrespective of their income bracket, a substantial number of consumers express a strong preference for fixed monthly amounts over the often-variable bills associated with traditional revolving credit card balances. This desire for financial clarity and stability is particularly evident for purchases in categories such as travel, concert tickets, home furnishings, and even groceries, where managing expenses with a clear payment timeline offers peace of mind.

BNPL's Broadening Customer Base

While card installments surge, BNPL services are simultaneously broadening their customer base. These platforms are now attracting a wide spectrum of users, including high earners who possess multiple traditional credit cards. This suggests that the appeal of BNPL extends beyond its initial demographic of consumers seeking alternative credit options. The growth rates for BNPL demonstrate steady gains across every generational cohort, with increases ranging from over 6% to nearly 13% depending on the specific age group, solidifying its position as a significant component of the modern payment landscape.

Card Issuers' Strategic Adaptations

In response to these evolving consumer preferences and competitive pressures, card issuers are far from passive. Many major banks are proactively introducing "Pay in 3" or "Pay in 4" plans that intentionally mirror the terms offered by standalone BNPL providers. This strategic move provides cardholders with the flexibility to convert qualifying purchases into structured installment payments even after the transaction has occurred. This approach represents a concerted effort by traditional financial institutions to retain spending on their existing card products while simultaneously addressing the growing consumer demand for clear, structured, and manageable financing solutions.

Store Cards Leverage Strategic Incentives

Store cards are also capitalizing on these emerging trends by offering compelling incentives. Their installment plans frequently feature attractive 0% promotional rates or extended payoff windows, particularly for substantial household purchases. Retailers, especially those in sectors like furniture and electronics, strategically deploy these financing options to enhance their competitiveness and capture a larger share of financing volume. Furthermore, young consumers, including those in Gen Z, who may possess shorter or developing credit histories, often find it easier to qualify for store cards. This accessibility plays a crucial role in driving the adoption and continued growth of store card installment usage among these key demographics.

Conclusion: A Redefined Future for Consumer Financing

While BNPL undoubtedly remains a rapidly expanding segment, the significant advancements in private-label and general-purpose card installments are fundamentally rebalancing the landscape of consumer credit. Should these trends persist, payment providers across the board will be compelled to re-evaluate and innovate their product offerings. The future of consumer financing will likely be defined by solutions that are simple, highly predictable, and meticulously tailored to individual budgetary requirements, marking an exciting new chapter in how consumers manage their purchasing power.